Graham-Kerry Initiative Boosts Climate Legislation -- But Repeats Threat to Trade

October 13, 2009

In a surprise New York Times op-ed last weekend, Senators Lindsey Graham (R-SC) and John Kerry (D-MA) announced a joint initiative on climate change.

The proposal mixes the good (I am glad it finally spells out that only carbon capture and storage turns coal into “clean coal”) with the bad. Still, it is welcome news that the Senate may finally be able to “count to sixty” and pass some kind of legislation to reduce emissions.

Yet, anyone who agrees that market access is essential for developing countries, and who knows how hard-won progress on trade has been, should worry that Graham and Kerry also call for trade sanctions against countries perceived as doing less on climate change than the United States.

They argue that,

There is no reason we should surrender our marketplace to countries that do not accept environmental standards. For this reason, we should consider a border tax on items produced in countries that avoid these standards. This is consistent with our obligations under the World Trade Organization and creates strong incentives for other countries to adopt tough environmental protections.

First off, any mention of border taxes should be followed by “… but not against least-developed countries.” (I am sure Senators Graham and Kerry do not favor punitive tariffs on Haiti and Burkina.)

Second, it is understandable that the senators worry about damage to U.S. industry, although Project Catalyst and many others find little evidence that climate legislation damages competitiveness. They rightly point out that, despite the great long-term benefits of climate action, some people will bear real immediate cost. I agree it is important to distribute this burden fairly -- within the United States.

Yet, this cannot involve shifting the burden to developing countries. Nancy Birdsall and I will discuss the pitfalls of border measures more broadly in a forthcoming paper. In short, we argue that they are ethically objectionable because they amount to reserving the right to unilaterally change whatever burden-sharing deal is agreed in Copenhagen. This is, mildly put, not a cooperative approach, and bound to undermine trust in the negotiations.

From a practical standpoint, climate-related tariffs are perilous because countries are unlikely to agree how various sets of national regulations compare in strictness. Climate legislation is complex, and will offer ample scope for disagreement: witness the 1427-page Waxman-Markey and ‘slim’ 821-page Boxer-Kerry bills. Disagreements about whether border taxes are appropriate raises the risk of retaliatory tariffs and protracted WTO litigation.

Imagine, for example, if Europe argued that its 30% reduction commitment below 1990 levels is far steeper than the U.S. (Boxer-Kerry) target of 7%, and imposed a commensurate tariff. Do we believe the United States would accept the measure? Imagine that the United States imposed a tariff on Indian steel. Do we believe India would accept it, given that India annually emits just 1.7 tons of CO2 equivalent per capita (in 2005), compared to the United States’ 24 tons?

Border taxes based on supposed differences in climate policies are a bad idea—and a serious threat to development as well as to a workable climate agreement. Senators Graham and Kerry should rethink this and exclude it from their proposed legislation.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.